[Inside Chodong] US and Europe Pull Back... ESG in the COVID-19 Era

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Hyunjung] The wind of ESG?Environmental (E), Social (S), and Governance (G)?swept across the world one day. It reassured people anxious about the looming climate change and seemed poised to save the future of humanity.

However, the COVID-19 virus that appeared shortly after disrupted the ESG trajectory in an instant. Masks, COVID-19 kits, vinyl gloves, and disinfectant wipes became the battle gear and daily necessities of the pandemic era, and the caution against single-use products not only diminished but disappeared altogether. In a situation where people were dying, confined at home, and borders were closed, it was difficult to even start a sentence with "This harms the environment (E)..."

Communication with stakeholders on social issues became complicated and challenging, and it was pushed down the priority list. Governance (G), which was already difficult to understand, remains in a state that is still hard to grasp.

The situation in Europe, which was considered to have considerable experience with ESG, is no different. Due to heatwaves and droughts caused by climate change, hydro and nuclear power generation decreased, leading to a renewed reliance on coal, the fossil fuel that was supposed to be phased out first. According to major foreign media such as The Wall Street Journal (WSJ), Europe’s coal imports for power generation reached 7.9 million tons in June, doubling compared to the same period last year. The global coal mine production, which was 8.173 billion tons last year, is expected to break the annual maximum production record this year. The movements in the capital markets are not much different. Although there was an attempt in Europe to create a global benchmark for ESG investment, discussions have been suspended recently due to internal conflicts over whether to include indicators such as gender equality and supply chains.

The United States has set goals to transition to 100% clean power by 2035 and achieve net-zero carbon emissions by 2050, but considering economic, geopolitical, and political realities, achieving 'zero' by then remains only a possibility. This is evident from the current profits of oil companies. ExxonMobil and Chevron, the top two oil companies in the U.S., posted record-breaking earnings in the second quarter of this year. ExxonMobil’s net profit for Q2 was $17.85 billion (approximately 23.3 trillion KRW), and Chevron’s was $11.62 billion. To reiterate, these are net profits, not just revenues, amounting to tens of trillions of won.

It is expected that ExxonMobil and Chevron will continue to perform well in the third quarter. Due to ESG principles agreed upon by banks, it has become difficult to borrow funds from banks for oil production or refining facility investments, and with gas pipelines shut, oil is needed even more. Therefore, there is only one answer: the giants will just get bigger.

[Image source=AP Yonhap News]

[Image source=EPA Yonhap News]

When ESG is discussed in such circumstances, there is always a counterargument starting with "At a time when the whole world is fighting COVID-19, inflation, recession, and heatwaves..." However, even during the past decades, which were perfect times to seriously consider ESG, Earth’s inhabitants did not genuinely or urgently contemplate it. They merely pretended to care by renaming initiatives like the Millennium Development Goals (MDGs), Sustainable Development Goals (SDGs), LOHAS, eco-friendliness, and green energy.

Swedish environmental activist Greta Thunberg sharply criticized, "You say you love your children, but that is a lie. You are actually stealing their future." However, the theft Thunberg anticipated has gone beyond the future of children and has come to affect our present. Mountains are burning and railways are bending worldwide due to abnormal temperatures exceeding 40 degrees Celsius. The United Kingdom, the land of gentlemen, advised people not to wash their hair daily, and Italy, a pilgrimage site for tourism, turned off its fountains. It is impossible to predict what will be banned next.